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The Budget 2010 Introduction »
Other Matters
Offshore tax evasion
Legislation will be introduced in Finance Bill 2010 to provide for larger penalties for taxpayers who fail to provide a full account of their income tax or capital gains tax liabilities, where the failure is linked to an offshore matter.
There may be penalties of up to 200% of tax for deliberate and concealed evasion. The higher penalties for non-compliance will be linked to the tax transparency of the jurisdiction in which the non-compliance arises. Where the non-compliance arises in a jurisdiction which does not automatically share that information, penalties of up to 150% will apply.
Where a jurisdiction agrees to share tax information automatically with the UK, the normal penalties will apply (ie up to 100%).
It is expected that the new penalty framework will apply to tax periods commencing on or after 1 April 2011.
Comment
It is more difficult for HMRC to check an offshore tax position when there is limited or no scope to exchange information with the country concerned.
Hidden Economy Advisory Group
The initial findings of the Hidden Economy Advisory Group set up at the Pre-Budget Report have been published.
The group has identified that there is currently no clear route for those with undeclared tax to establish their position and disclose their liabilities. HMRC will improve this process. The group has also highlighted several key areas for further work.
Late filing of returns and payment of tax
A measure will complete the reform of the penalty regimes for late filing of tax returns and late payment of tax. The reform began when legislation for taxes including income tax, corporation tax and inheritance tax was enacted in 2009.
Other taxes including VAT, landfill tax and duties are now included. The new regimes will replace the current variety of penalties and will treat late payment of tax and late filed returns separately. The legislation creates penalty models which reflect the more frequent filing and paying obligations for these taxes and duties compared to the direct tax penalty models enacted last year.
The government intends to legislate this measure as soon as possible in the next Parliament.
Comment
Implementation of new penalties for late filing and late payment requires changes to HMRC computer systems and internal processes and is to be staged over a number of years.
Time to Pay
HMRC will continue to offer Time to Pay as part of its support for all viable businesses having difficulty in meeting their tax obligations. In addition, to ensure that all requests continue to be assessed on a consistent basis, businesses that need to use the service more than once will be directed to a specialist team.
Video games industry
The government has announced that, following consultation on design, it will introduce a tax relief for the UK’s video games industry, subject to state aid approval from the European Commission.
Addition to all Tax Return
We are taking this opportunity to update you on some important matters which could have a significant effect on your future income.
Child Benefit
From January 2013 Child Benefit will be clawed back from households with a higher rate taxpayer. The higher rate tax threshold will begin for income of around £42,000. Taxpayers can contact H M Revenue & Customs to stop receiving Child Benefit or otherwise the money will be recovered from the higher rate taxpayer through the PAYE or Self-Assessment system.
If you have children, these changes could have a significant impact on your weekly income. Child Benefit is currently paid, normally to the mother, at a rate of £20.30 for the eldest child and £13.40 for each subsequent child. Please telephone your normal contact if you are concerned that you will be affected by these changes. We can review your circumstances to see if steps can be taken to mitigate the effects of the changes.
Tax Credits
Protective Claims
It is worth considering making a “protective claim” for tax credits, even if income is currently too high to qualify for an award. A protective claim produces a £Nil award of tax credits, but this can be amended at a later date if the claimant’s income reduces unexpectedly, for example, due to redundancy or business losses.
If a claimant is not already in the tax credit system, a new claim can only be back-dated up to three months, so that the amounts at stake could be considerable.
Income Thresholds
A claim for Working Tax Credits can be beneficial for a single person aged 25 or over, working 30 hours per week and earning between £9,250 and £17,000.
A claim for Child Tax Credits can be beneficial at income levels between £6,420 and £40,000. These claims are made jointly if you are married or if you live with your partner.
Income Disregard
The income disregard has been reduced this year from £25,000 to £10,000. From 6 April 2013 the income disregard will decrease to £5,000. The income disregard is the amount by which income can increase from one year to the next without affecting the tax credits award of the second year. It can be a useful vehicle for one-off tax planning.
State Benefits and Tax Credits are not normally an area we specialise in but we will be happy to help in this area if you wish to engage us to take on this additional work. |
